Absa Bank writes off Kes 1.8 Billion under credit repair initiative
Absa Bank Kenya says it has written off Kes.1.8 billion in digital loans under the CBK-guided credit repair program, an exercise that was directly spearheaded by the President.
During the campaign trail, President William Ruto fronted an ambitious debt forgiveness framework as a solution that would ease the burden of non-performing loans for institutions and at the same time provide relief to borrowers including small businesses that were heavily impacted by the coronavirus pandemic.
Absa Bank Interim CEO, Mr. Yusuf Omari said that the repair program covered at least 400,000 borrowers whose loans were listed as non-performing by the end of October 2022.
Earlier this month, the CBK announced the rollout of a Credit Repair Framework by commercial banks, microfinance banks, and mortgage finance companies. A statement from the Central Bank said that the framework sought to improve the credit standing of mobile phone digital borrowers whose loans were non-performing and had been reported as such to Credit Reference Bureaus (CRB).
“Institutions will provide a discount of at least fifty percent of the non-performing mobile phone digital loans outstanding as at end of October 2022, and update the borrowers’ credit standing from non-performing to performing” the statement notes.
The lending institutions are then expected to enter into a repayment plan with the borrower for a period up to May 31, 2023, for the balance of the loan.
But despite this initiative, however, Absa Bank said that the bad loans had already been written off as NPLs and provided for under IFRS 9 provisioning and, therefore, the CBK directive will actually enhance collection efforts.
When he rose to speak, Mr. Omari said that Absa was giving the borrowers a 50 percent waiver, and six months to offset the balance as per the CBK directive.
He said that Absa Bank will continue employing other criteria on top of CRB listing to guide future lending on its digital platforms which it said have become key drivers of Non-Funded income.
Mr. Omari told investors that at least 94% of previously loans restructured during the pandemic period were now performing.
That’s the kind of thing you’d expect from an economy like Kenya’s where extremely good and extremely bad circumstances rarely stay that way for long because the macroeconomic environment varies and adapts in hard-to-predict ways.
Mr. Omari was speaking during an investors roundtable in Nairobi, where the bank announced Kes 10.7 Billion in net profit during the first nine months of the year – a 30.5 % increase compared to a similar period last year.